How you can resist funding the government →
about the IRS and U.S. tax law/policy →
IRS incompetence →
enforcement effort/results →
IRS Advisory Council reports on
The report begins, like so many of these
IRS
oversight reports from the strangely many
IRS
oversight bodies, with a yet-more-strident plea that Congress stop slashing the
IRS
budget, and with yet-more-dire predictions of how such cuts, by degrading the
ability of the agency to do its job competently, will cause taxpayers to turn
away in disgust. For example:
[W]hile much of the lower collections will be attributable to the relatively
small percentage of taxpayers who have traditionally ignored their
responsibilities, a growing amount may be attributable to the effects of
increasing cynicism of taxpayers about the fairness and integrity of the tax
system. Thus, previously honest and diligent taxpayers who would otherwise end
up paying more to subsidize noncompliance by others could themselves be
tempted into noncompliance.
More broadly, any reduction in voluntary compliance and the
VCR will increase the cost of
enforcing the tax law. Whatever the costs of running the current system, those
costs are orders of magnitude less than what would be necessary if taxes were
in fact forcibly exacted rather than paid by honest citizens striving to
voluntarily comply with their obligations, and who would want to live in such
a system.
The
IRS
Advisory Council has issued its latest
public report. It adds
to the chorus of
IRS
oversight bodies raising the alarm about the effects of reduced budgets at the
agency. Excerpts:
[F]unding for the
IRS
has decreased about 20 percent on an inflation-adjusted basis
, and
is now below
levels. These reductions largely do not include the effects of the unfunded
mandates of significant program costs, like [Obamacare and the 2017 tax reform
law]… Over the past several years, the
IRS’s
workload and responsibilities increased even as staffing levels declined. For
example, , the
total number of returns filed increased by nine percent. The number of
IRS
employees is down by more than one-third from past staffing levels, primarily
in compliance and enforcement… In
,
the IRS
audited 0.6 percent of all individual returns filed, compared to 1.1 percent
in ,
a drop of approximately 50 percent. In
,
the IRS
audited 2.5 percent of all business returns (assets greater than $10 million)
filed, compared to 5.7 percent in
,
a drop of more than 50 percent. Meanwhile, cybersecurity and identity theft
refund fraud prevention programs consume a larger share of the budget.
The implications of this, according to the report:
The degraded service and enforcement functions may adversely affect the
voluntary compliance of many taxpayers. Our tax system is one of
self-assessment. The cost of collecting the taxes imposed by the government to
enable funding of government programs is orders of magnitude less than it
would have to be if taxpayers did not themselves voluntarily assess and
collect those taxes. We are on a slippery slope in that once taxpayers lose
confidence in the present system, that voluntary compliance may significantly
erode.
[W]hile much of the lower collections [from enforcement underfunding] will be
attributable to the relatively small percentage of taxpayers who have
traditionally ignored their responsibilities, a growing amount may be
attributable to the effects of increasing cynicism of taxpayers about the
fairness and integrity of the tax system. Thus, previously honest and diligent
taxpayers who would otherwise end up paying more to subsidize noncompliance by
others could themselves be tempted toward noncompliance.
